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Bank of Japan has ended eight years of negative interest rates

Published on March 21, 2024
Current Context: The Bank of Japan (BOJ) has indeed ended its negative interest rate policy. This is a significant shift in Japan’s monetary policy, marking the first time in 17 years that the BOJ has raised its key interest rates.
Bank of Japan has ended eight years of negative interest rates
  • The decision to end the negative interest rate regime was put forward by Governor Kazuo Ueda.
  • The BOJ’s key interest rate has been increased, and this move is seen as a reaction to changes in the Japanese economy.
  • Economists and experts predict that the next policy rate hike is likely to occur in the second half of 2025, depending largely on economic and financial markets in Japan and abroad.
  • The negative interest rate policy was initially adopted to encourage bank lending, spur demand, and nurture inflation.
  • Now, with strong wage gains bringing the BOJ’s inflation goal into sight, the policy’s mission is nearing an end.
  • The BOJ’s lending rate for overnight borrowing by banks was raised to a range of 0 to 0.1% from minus 0.1%.
  • This move signifies a shift away from ultra-lax monetary policy and is seen as a step towards “normalizing” monetary policy.

Question:

Q.1 What was the purpose of the negative interest rate policy initially adopted by the Bank of Japan?
a. To discourage bank lending and reduce inflation
b. To encourage bank lending, spur demand, and nurture inflation
c. To stabilize the Japanese Yen against foreign currencies
d. To increase the national debt
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